Market strength back; perhaps numbers lie

U.S. stocks rose while Treasuries retreated amid speculation that a weak factory report masks economic strength. European equities extended the biggest weekly advance this year as the region’s economy grew more than forecast. Gold rallied and oil retreated.

The Standard & Poor’s 500 Index added 0.3 percent at 10:56 a.m. in New York, extending a weekly gain. The yield on 10-year Treasuries rose one basis point to 2.75 percent. The Stoxx Europe 600 Index climbed 0.6 percent, headed for a 2.5 percent increase this week. The Bloomberg Dollar Spot Index fell to a two-month low. Italy’s bonds advanced as Prime Minister Enrico Letta resigned while Argentine bonds rallied after the government started a new inflation index. Gold held above $1,300 an ounce and oil retreated below $100 a barrel.

U.S. factory output unexpectedly declined in January by the most since May 2009, adding to evidence severe winter weather weighed on the economy. Consumer confidence was unchanged. The euro-area’s economy expanded 0.3 percent in the fourth quarter, up from 0.1 percent in the previous three months, with Italy growing for the first time since 2011, the European Union’s statistics office said.

“I think the market is still believing that the economy is moving in the right direction,” Robert Pavlik, chief market strategist at Banyan Partners LLC, which manages $4.5 billion, said in a phone interview. “Most of the reports are being negatively affected by the weather. Folks are looking to buy on the dips.”

Stocks Rebound

The S&P 500 has rallied 2.1 percent this week and advanced six of the past seven days. The gauge is up 5.3 percent from a three-month low on Feb. 3 on speculation economic growth is strong enough to withstand further cuts to monetary stimulus.

Fed Chair Janet Yellen said this week growth has strengthened and that only a “notable change in the outlook” for the economy would prompt policy makers to slow the pace cuts to the monthly bond-buying program.

The 0.8 percent decrease at manufacturers followed a revised 0.3 percent gain the prior month that was weaker than initially reported, figures from the Fed showed. The median forecast in a Bloomberg survey of economists called for a 0.1 percent advance.

The Thomson Reuters/University of Michigan preliminary index of U.S. consumer sentiment was unchanged in February from a month earlier at 81.2. The median estimate in a Bloomberg survey of 74 economists called for a decline to 80.2. Forecasts ranged from 76.5 to 86.

“There is an expectation that weather is involved in the economic weakness and that a rebound is coming in March, April,” John Augustine, chief market strategist at Cincinnati- based Fifth Third Bancorp, said in a phone interview. His firm oversees $27 billion.

Earnings Scorecard

U.S. equities have also climbed this week amid better-than- forecast corporate earnings. Seventy-five percent of the 400 companies that have posted results this season beat analysts’ estimates for profit and 64 percent exceeded sales projections, data compiled by Bloomberg show.

Among stocks moving today, Cliffs Natural Resources Inc. jumped 6.6 percent after the iron miner reported earnings that topped estimates. Campbell Soup Co. advanced 3.7 percent as second-quarter profit exceeded forecasts and the company reiterated its target for full-year adjusted income. Occidental Petroleum Corp. gained 3 percent after saying it will split its operations in California as one of the final steps of a breakup plan.

In Europe, three shares advanced for every one that declined in the Stoxx 600, with trading volumes 11 percent less than the 30-day average, according to data compiled by Bloomberg.